2026 has started with a swirl of comment on NZ Super. Much is rubbish, perceptions, mis info, and not policy views.

Peter Dunne joined the Fray with this peice. Editor note  I doubt Kiwi Saver is a replacement for NZ Super, at least not in current format Its a voluntary savers scheme with many caveats.

Martin Hawes also followed, will post that next week!

Time to stop this sterile status quo on superannuation – Peter Dunne Peter Dunne was the leader of United Future and served as a minister in former National and Labour governments

Opinion:The superannuation debate reared its head again last week at the New Zealand Economics Forum but – as usual – no firm conclusions or new ideas emerged.Superannuation has been a political football since 1974 when the Kirk Labour Government replaced the old universal pension with the compulsory contributory Superannuation Scheme. It was a comprehensive plan that would take until 2012 to implement fully. The substantial fund it created through individual contributions would not only provide retirement security but also give the government billions of dollars to invest in social and physical infrastructure.

In 1975 Muldoon’s National Opposition countered with the simple bribe of an immediate, non means-tested, taxpayer-funded universal pension, without the spectre of the government using superannuation funds to take over the economy, as his Dancing Cossacks advertisement claimed. National swept to office that year, abolished the nascent Labour scheme and implemented National Superannuation in 1976.

The problem of how to sustainably fund it quickly became apparent. However, in 1984 when the Labour government suddenly introduced a 25 percent tax surcharge on superannuitants earning more than $100 a week in other income, the superannuation wars began. National promised to repeal Labour’s surcharge, only to introduce a more severe form in 1991. A brief accord between National and Labour before the 1993 election quickly broke down and normal hostilities resumed.

Meanwhile, as the population aged, the costs rose steadily. National raised the age of eligibility from 60 to 65, and Labour established the Superannuation Fund to pre-fund a portion of superannuation. But the steadily rising population of over-65s, and the burgeoning costs of provision continued.

Labour introduced KiwiSaver in 2007 which was really a modified voluntary version of its 1974 scheme. This has been extremely successful, with 3.4 million New Zealanders, including 90 percent of the workforce, now enrolled. However, active contribution rates are not as impressive. March 2025 figures showed that 1.6 million KiwiSaver members were not making contributions, because they were either not in paid employment or had an approved contributions holiday.

There have been no other superannuation innovations since the introduction of KiwiSaver. Debate on possible future superannuation changes has mainly been about either increasing the age of entitlement, or introducing some form of means-testing. Given the controversy of the last 40 years, both are really political non-starters. National has previously unsuccessfully floated increasing the age of entitlement from 65 to 67 over 20 years, and still retains that policy, but the idea has little wider political support.

Nor is there any enthusiasm across the political spectrum for means-testing superannuation, so the status quo prevails, leaving academics, demographers, and economists to fret about its long-term affordability. Last week’s inconclusive discussion at the Economics Forum was typical of the earnest angsting that occurs from time to time.

The solution to the long-term superannuation conundrum lies more with KiwiSaver and other innovations than it does with tinkering with Superannuation. The aim should be to move to a point over time when KiwiSaver in effect replaces Superannuation as the primary source of retirement income.

To that end, KiwiSaver should be made a compulsory retirement savings scheme for everyone entering the workforce. Current opt-out provisions should be removed so that KiwiSaver returns to its original objective of contributions being locked away, untouched until retirement. Minimum contribution rates should be steadily increased, with matching tax offsets. An effective scheme for children joining KiwiSaver should also be developed. An annuities policy should be established to help people properly manage their future finances once their KiwiSaver accounts are paid out at age 65.

At the same time, Superannuation should be refocused to support those who – for whatever reason – have not been able to participate fully in the workforce and make long-term KiwiSaver contributions. This could include more flexible superannuation arrangements along the lines of the United Future Party’s Flexi-Super policy, which I proposed when leader of the party.

Under this proposal, which was the subject of a government discussion paper in 2013, people had the option of taking a reduced rate of Superannuation from 60, or a higher rate if they deferred taking it up until they were 70. It was aimed at providing more choice for retirees, especially those with shorter life expectancies, often Māori and Pasifika. Although the idea was popular, it was ultimately rejected by the government because it was worried people taking superannuation early at the lower rate would still expect to receive the standard rate once they turned 65.

United Future’s policy was predicated on making KiwiSaver a compulsory scheme at the same time. The assumption was that over time the greater emphasis and reliance on a properly incentivised KiwiSaver scheme would lessen the need for Superannuation as a major source of retirement income. That would also make more feasible the introduction of targeted innovations such as Flexi-Super, especially for those without significant KiwiSaver balances.

As our population ages, the affordability of Superannuation will become an increasingly significant matter for future governments. However, knee-jerk reactions such as lifting the age of eligibility, over whatever time-frame, or introducing new forms of means-testing will always be politically fraught and therefore unsustainable. Yet the steadily ageing population means that doing nothing is not an option for future governments.

Enhancing KiwiSaver and strengthening its locked-in provisions, supported by more flexible wider superannuation arrangements along the lines of Flexi-Super, provide the best opportunity of establishing viable long-term superannuation arrangements. Such a mix would address the affordability question and differing individual circumstances. It would also respect individual dignity and ensure appropriate income security for older New Zealanders.

Future-focusing the superannuation debate this way would move away from the sterile relitigating of history that dominates current discussion. It may even encourage politicians to develop constructive solutions.